Invesco PowerShares announced in December that its board had approved the shuttering of thirteen exchange-traded portfolios near the end of February, including a number of energy funds, bond funds and equity portfolios. The move comes as the Chicago firm is looking to weed out some of its least productive ETFs and, unlike some other issuers, losing thirteen funds is barely a dent in Invesco’s portfolio of 171 funds. February 26 will be the last day of trading for the following ETFs:
- Dynamic Insurance Portfolio (PIC)
- Morningstar StockInvestor Core Portfolio (PYH)
- Dynamic Banking Portfolio (PJB)
- Global Steel Portfolio (PSTL)
- Active Low Duration Portfolio (PLK)
- Global Wind Energy Portfolio (PWND)
- Active Mega-Cap Portfolio (PMA)
- Global Coal Portfolio (PKOL)
- Global Nuclear Energy Portfolio (PKN)
- Ibbotson Alternative Completion Portfolio (PTO)
- RiverFront Tactical Balanced Growth Portfolio (PAO)
- RiverFront Tactical Growth & Income Portfolio (PCA)
- Convertible Securities Portfolio (CVRT)
As the ETF industry continues to expand rapidly, product closures have become a regular occurrence. Unless the minimum number of investors is reached, the revenues generated through management fees are not sufficient to cover the associated expenses, meaning that they are being run at a loss. The PowerShares ETPs being shuttered in February combined to represent only about $128 million in aggregate assets, a minor portion of the company’s total lineup.
Handling ETF Closures
ETF closures are generally very orderly procedures; the products highlighted above will continue to track their index and continue to trade regularly for the next month or so. Eventually, the underlying securities will be sold and converted to cash, which will be distributed to shareholders who elect to continue to maintain their positions in these ETFs.
Investors are advised to avoid “panic selling” on news of an ETF closure, as putting in a market order to liquidate shares can potentially result in a less-than-optimal execution. Investors essentially have two options: selling the shares of the closing ETFs in the next month, or receiving a cash distribution once Invesco liquidates the funds [see How To Deal With ETF Closures].
Disclosure: No positions at time of writing.
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